In Plumbers & Pipefitters Locals and West Virginia Pipe Trades Health & Welfare Fund v. Nitro Construction Services, Inc. (4th Cir., No. 20-2080, 2/23/22), the Local Unions and Nitro Construction were parties to collective bargaining agreements which incorporated the Health & Welfare Fund for employees of the participating employers. The Trust Agreement provided a policy for delinquent contributions, which imposed liquidated damages of 10%, plus interest and attorney’s fees. Nitro was late on two payments to the Fund which subsequently filed suit for the liquidated damages. However, Nitro had paid the contributions prior to the filing of the suit.
In affirming the district court’s dismissal, the court held that federal common law applied in breach of contract actions under Section 301 of the Labor Management Relations Act, that liquidated damages are disfavored, and the Fund had not shown the damages were reflective of the damages anticipated from late payments. However, the Fund argued that the general labor law of Section 301 should give way to Section 502(g)(2) of ERISA, which authorizes liquidated damages for unpaid contributions to welfare and benefit funds. The court held this argument was misplaced, as that section of ERISA only applies to “unpaid” contributions, and these contributions were not “unpaid”, but “tardy”, See also, Michigan Carpenters Council Health and Welfare Fund v. C.J. Rogers, Inc., 933 F.2d 376, 390 (6th Cir. 1991).